AFTER sugar, the Government is now set to substantially decontrol the dairy industry by scrapping the concept of designated `milksheds' in the Milk and Milk Products Order, 1992 (MMPO). The decision, expected to be formally announced in the coming Budget, would virtually remove the last vestiges of control on the industry.

Currently, the MMPO requires any dairy plant handling or processing more than 10,000 litres per day (LPD) of milk to obtain Governmental registration, with the registration authority being the concerned State Government for capacity up to 100,000 LPD and the Central Government in case of capacity beyond this level.

Further, under Section 11 of the Order, "Every holder of registration certificate shall collect or procure milk only from the milkshed assigned under the registration certificate''. The milkshed, in turn, is defined as "An area geographically demarcated by the registering authority for the collection of milk or milk product by the holder of a registration certificate''.

According to reliable sources, what is being planned is to do away with the concept of milkshed altogether, which would effectively end the monopoly enjoyed by any particular dairy in procuring milk from farmers within a designated area.

Thus, a company like Nestle India Ltd, whose milkshed covers an area of 7,360 km around its plant in Moga (Punjab), would have to reconcile itself to the fact of other dairies `poaching' on the territory it may have painstakingly nurtured over the last 40 years. But then, Nestle, on its part, can also expand the scope of its own milk procurement operations, which are now limited to its assigned milkshed.

While the MMPO does allow plants to procure beyond the milkshed area in certain cases, this would, however, be only if the "registering authority considers it necessary in the public interest'' and "for such period, not exceeding 90 days, as it may specify in that behalf''. Moreover, the collection of milk from outside the milkshed can be made only through a cooperative dairy milk federation or union.

"Once the milkshed concept goes, there would hardly be any controls remaining on the dairy sector. The registration process is a mere formality because there are very few instances where plants have been denied registration,'' the sources pointed out.

In fact, as on July 2001, as many as 675 dairies with a total milk handling capacity of 686.7 lakh LPD have been granted registration under the MMPO. This covers nearly a third of the country's total annual milk production of 81 million tonnes.

The sources said that the proposal for abolishing the milkshed concept has basically come from the former Agriculture Minister, Mr Som Pal, who is currently Member, Planning Commission. Mr Som Pal is learnt to have originally piloted the proposal for introduction in the 1998-99 Union Budget, but it was scuttled at the very last minute through concerted lobbying by cooperatives such as Amul.

Interestingly, this time round, it is not only Amul but even Nestle that is opposing scrapping of the milkshed concept. "It will lead to all-round chaos,'' a spokesperson of Nestle India Ltd told Business Line.